CentreForum says equity could fill small business funding gap

THE GOVERNMENT must slash financial taxes and cut red tape to allow small firms to fill their funding gaps by going public, a think tank said yesterday.

Ending the tax and regulatory bias toward debt finance would be a massive step toward narrowing the £59bn funding gap faced by small and medium sized enterprises (SMEs), CentreForum claimed in a new report.

“Equity markets offer a huge opportunity to unlock a vast amount of growth capital,” said CentreForum’s Tom Papworth, co-author of the report.

“This will enable innovative and dynamic British firms to grow at a rapid rate, while making the UK the international marketplace for fast growing companies and ambitious entrepreneurs,” Papworth added.

The think tank called on the government to abolish stamp duty on all share transactions, allow stocks and shares ISAs to include equity trade on the Alternative Investment Market (AIM) and other markets including smaller firms.

They also demanded a wider entrepreneurs’ relief, and for capital gains tax bills to take into account paid corporation tax – as is done for dividend income.

The report gained a positive response from politicians, market makers and business groups.

“CentreForum’s report contains some interesting ideas for how access to equity finance for SMEs can be improved,” said business secretary Vince Cable.

The Confederation of British Industry (CBI) endorsed all the report’s major policy guidance.

And London Stock Exchange chief Xavier Rolet said his firm “wholeheartedly supports the recommendations in CenteForum’s report.”